Standard Risk
What Does Standard Risk Mean?
A standard risk refers to an insurance risk that aligns with an insurance company’s underwriting standards, which is considered common or normal. As a result, it qualifies for standard premium rates without special restrictions or additional ratings. In contrast, a non-standard risk is assessed based on how much it deviates from a standard risk, influencing the premium pricing by either gaining or losing “points.”
Insuranceopedia Explains Standard Risk
For example, a healthy, non-smoking young adult would likely receive standard premium pricing for a life insurance policy, while a smoker with a family history of terminal illnesses might be classified as a substandard risk and would likely pay significantly more for the same policy. The specific circumstances, history, or habits of each individual determine whether they are classified as a standard or non-standard risk, which ultimately affects their insurability and premium rates. Individuals who pose a lower risk can generally expect to pay less for the same coverage compared to those who present a higher risk.
